How FinTech’s Win Big in the Fight Against FinCrime
The FinTech space continues to proliferate — creating new markets for the payment and wallet needs of the masses. Leveraging technology to put the control of money movement into the hands of the masses breaks all of the conventional norms of banking — hence the disruption and revolution we have been seeing over the past decade.
With most successful revolutions comes the shock of becoming the trusted and governing body of the people that decided to follow you to the better place or way. In the FinTech revolution — many scaling and successful platforms have had to learn this lesson the hard way (government enforcement actions; class action civil suits; brand and reputation damage; etc.). So what lessons can be learned and how can the concept of fighting financial crime first guide the way for new startups and early stage FinTechs?
The Concept of Fighting FinCrime First
FinTechs are product companies — they build products and services intended for customers at scale. In most product companies — customer experience is everything. Customer experience is the driver behind R&D, product development, and product roadmaps.
The culture of product companies is often shaped by designers and engineers that build — with the great ones building exactly what the customers want. What do the contemporary customers want? They want speed, accessibility, convenience, and frictionless experiences when it comes to their money. They also want trust, safety, continued innovation through additional features/functions of the product(s) that they use — and here is where the great opportunity exists for FinTechs to conceptualize, design, beta, and deploy financial technology with the idea of fighting financial crime first.
Mindset and Strategy
If FinTechs are being advised that AML is a compliance problem or obligation, then the business opportunity is being missed. Thinking about AML/FinCrime as both a risk mitigation and risk maximizing opportunity is where the mindset should baseline. I won’t belabor the risk mitigation component because that’s not what this story is about — but what is risk maximizing? If you are going to “have to” do something that is a cost why not turn it into something beneficial or make the best use of all of its outputs. Mindset.
Formulating a strategy in the earliest possible stage of product development can achieve this risk maximizing opportunity.
Six Strategic Components of Product Development
- Identity Management
2. KYX
3. Data Management
4. Modeling and Monitoring
5. Risk and Business Intelligence
6. Risk and Sales Actions
If these components are unfamiliar — be sure to hire a good consultant that understands the sequence and importance.
Dimensions of Winning Big
Culture. Start there. Embedding a fight financial crime mission to the mission of financial technology disruption should motivate everyone (make it easier for people to do their banking and make it harder for bad guys to fund and profit from human trafficking — a no brainer for any decent human).
Customer. Winning the trust and credibility of customers means loyalty. Loyalty is retention and retention is annual recurring revenue — so you can go raise tons of money and ultimately ring the bell if you want to.
Shareholder Value. The bottom line is on the mind of every shareholder…and today so is ESG…and if you don’t think fighting financial crime is a major component of ESG then you are missing the point of it all.
Favorable Government Conditions. Doing the right thing from the start for your culture, your customer, and your shareholder will put you in a great position with the regulators watching your next big moves.
So if you’re an aspiring FinTech concept or even an early stage FinTech — fight financial crime first and win big in the long run!
